EU Digital tax proposal appears to be targeted against the US

22 March, 2018

Commenting on the EU Digital tax proposal, PwC's Head of Tax, Joe Tynan, said: "Today has seen the launch of the EU's Digital Tax proposals. Various drafts have been widely leaked and the text released today is in line with the previous documents. The EU have stated that there is a high political pressure for Member States to adopt short-term measures."

"The EU themselves are unhappy with what they are proposing. They have said "We are nonetheless aware that such a short-term measure is sub-optimal and has a series of drawbacks and limitations.""

"It is hard to see that a country could impose a tax on companies of a certain size in one sector without breaching State Aid rules which do not allow for discrimination."

Joe Tynan Head of Tax, PwC Ireland

"The OECD published their interim report on Friday. They are not in favour of interim measures. In general, the OECD does not favour unilaterally measures. The EU Digital Tax is a crude tax on turnover and will result in loss making companies being taxed on the same amount as a very profitable companies with high margins. It is mostly US companies that will be subject to the tax. At a time of tension on international trade, this "levy" on turnover will not help. It appears to be targeted against our largest trading partner, the US. The Digital Tax will be treated as an expense and therefore deductible against corporate profits and corporate tax. As many of these companies are based in and paying tax in Ireland, it will reduce the corporate tax take in Ireland. This is a unilateral measure by the EU. The challenge of taxing Digital companies requires a multi territory response. We should work with the OECD to agree a common framework. Ireland has consistently stated that the forum for discussion on the digital economy should be the OECD and we echo those comments."

"The EU say they are doing this as, if they don't, individual EU countries will do so in any event. It is hard to see that a country could impose a tax on companies of a certain size in one sector without breaching State Aid rules which do not allow for discrimination. Indeed, this is an area that the EU have previously explored from a State Aid perspective."

ENDS

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